Steven Cohen in his own words

The thing about deposition excerpts—even lengthy ones—is that some of the tantalizing material gets left on the cutting room floor. And that’s certainly the case with hedge fund billionaire Steve Cohen’s two-days worth of testimony in the long-running Fairfax Financial litigation.

Now don’t get us wrong—there is plenty of great and illuminating stuff in the 242 pages of deposition testimony Reuters obtained through a court motion to unseal documents in the civil lawsuit. As we noted in our story, Cohen is pressed at great length for his views on insider trading—he thinks the laws are “vague”. And as we highlighted in our blog, there’s even an amusing little feud between the lawyers over how the SAC Capital founder should addressed.

Still, it makes you wonder what was said by Cohen in the more than 400 pages of deposition transcript that wasn’t unsealed. And we’d love to see Cohen on videotape as sometimes body language can be revealing.

One of the more intriguing tidbits in the deposition is a very brief line of inquiry by Fairfax’s lawyer about whether Cohen had an early discussions in September 2008 about the Federal Reserve’s plan to backstop the commercial paper market. The Commercial Paper Funding Facility, or CPFF, was one of the most important steps taken by the Federal Reserve to keep liquidity following in the financial system after the collapse of Lehman Brothers.

Indeed, between July 2007 and the failure of Lehman Brothers, the relative use of commercial paper fell 10 percentage points, according to a research paper by the Federal Reserve Bank of Dallas. The Fed’s CPFF program, which was announced in October 2008, “helped prevent commercial paper from imploding by as much as it did in the 1930s,” the paper added.

When asked by Fairfax’s lawyer if he or someone on his team was given a heads up on the CPFF, Cohen responds, “I don’t remember that.” He then goes on to say, “I’m not a credit person.” (see page 352 of transcript)

The line of questioning appears to have continued but it’s not in the excerpted transcript obtained by Reuters. Maybe nothing more came of it, given Cohen said he didn’t know anything about it.

But in the wake of a Bloomberg story revealing that former Treasury Secretary Hank Paulson, in summer 2008, may have discussed some of his thoughts about Fannie and Freddie with a group of hedge funds, it makes you wonder about the flow of information between government officials and big money traders.

This is good Matt and funny. But I want to know if Cohen testified that he never gets together with other traders to group short a stock? Did you see any of this in the unsealed testimony. I also think it’s a miracle Reuters gave you a few bucks to use a legal motion to get this Cohen dialog.